Port tariff rollback advocates barking up the wrong tree?

Groups demanding a rollback in port tariff rates are barking up the wrong tree if they hope such move can reduce the cost of cargo movement and handling and benefit traders and consumers, according to Rene Cruz, general manager of the South Cotabato Integrated Port Services Inc. Cruz said a 10-percent reduction in freight cost charged by shipping companies will have greater cost impact than eliminating the arrastre fees altogether.

He explained that this is because freight charges account for 92-95 percent of the total cost of moving while arrastre and port charges represent just four to eight percent.

He said this is contrary to the claims by the Coalition for Shipping and Port Modernization that port-related charges account for 49 percent of total freight and cargo handling cost. He said the CSPM calculation is not only erroneous but misleading because it included non-port-related costs like billings of cargo forwarders, consolidators, customs brokers and truckers for activities that take place inside the port.

Cruz cited actual arrastre and stevedoring charges at the General Santos City port, one of the country’s busiest and most modern ports.

For class A containerized cargo, the arrastre rate in Gen San accounts for 2.25 percent of total freight and handling cost. Pier-to-pier to Manila, the rate makes up 4.66 percent, value added tax and share of the Philippine Ports Authority included.

Thus, he said, port cargo handling charges are not to blame for the high cost of moving goods around the country.

Cruz explained that while arrastre fees are fixed regardless of commodity classification, freight charges vary so that a mere commodity reclassification could jack up a shipper’s freight cost.

He lamented that while shipping rates are deregulated so that shipping companies can increase their charges at freely and quickly to respond to market forces and recoup losses whether real or imagined, port operators have to contend with public hearings and government approval before any adjustment in arrastre and stevedoring rates can be effected.